AGORACOM Small-cap Investor Relations Blog

A PICTURE IS WORTH A THOUSAND WORDS…AND SOON TO BE A THOUSAND DOLLARS

Don’t say I didn’t tell you here, then here then here. Hell, with gold about to break $1,000, how can I not point out that I told you so on January 10th (Ron Paul says gold has been rigged) January 3rd (Checkmate), November 27th (Mortgage Reset Chart) and November 15th (Google Shows Washington Is Worried). On top of that, if you didn’t believe me, we also had Jean-Francois Tardif (the #18 hedge fund manager in the world from Sprott) confirm it not once (November 9th) but twice . For good measure we even had Jim Rogers (Quantum Fund) tell it to you straight from his mouth.

By the way, for newbies that don’t understand my Die Hard reference, just read this.

The only question remaining is will gold break through $1,000 by the time PDAC arrives in Toronto next week? Doubtful but possible if the straw on the camel’s back is breaking … and man would it make for one great AGORACOM party on Sunday night!

UPDATE: Gold hit $976 (April futures) and $973 (cash market) in overnight trading.  Silver for immediate delivery hit $19.83.

Regards,
George

Hey, gang. Just a quick note that gold hit $944 after-hours today. Reuters posted this story just a few minutes ago and my $1,000 call from January 3rd is looking better and better.

UPDATE: Great article from TheStreet.com that summarizes the basis of the gold move, without mentioning gold. Specifically, inflation numbers out of the US this morning were higher than expected. This may handcuff the Fed who now have to be worried about inflation but want to provide greater stimulus to the economy via rate cuts. Either road leads to higher inflation = higher gold prices.

Regards,
George

In the original Die Hard, Theo, the gang’s technical mastermind, begins disabling the sequential vault locks, warning Hans Gruber that the final electro-magnetic based lock will be impossible to bypass. Hans Gruber tells him not to worry and to continue cracking the first 6 security measures.

Fast forward a couple of hours and the Nakatomi building has been surrounded by LAPD but the Feds show up (Agents Johnson and Johnson) and start running the anti-terrorism playbook. Right on cue, the duo order the building’s power be cut, which serves only to deactivate the final lock on the building’s vault, just as Gruber had planned.

As the vault door opens and reveals the treasures secured inside Gruber gleefully states: “You asked for a miracle, I give you the FBI“.

Gold bugs have been calling for $1,000, $2,000 per oz and beyond, leading to fortunes for the entire industry. Wall Street said it couldn’t be done. What are gold bugs saying today?

“You asked for a miracle, I give you the US Federal Reserve”.

p.s. Hans Gruber was a bad guy, gold bugs aren’t. They just both knew where the money was.

Regards,
George

2 days ago I posted a story titled “Cramer – Citi Is Still Sitting On $40 Billion In Mortgage Paper That Is Worthless“. If that rightfully scared the hell out of you, then this sequel video is going to outright terrify you. Even a hard core realist like me was shocked to watch the despair of Cramer, who has often been accused of being Wall Street’s biggest cheerleader.

Well, you can strip that title from him.

He genuinely believes that he and millions of investors have been – and continue to be – lied to and ripped off by the banks, insurers and credit ratings agencies – all in the name of commissions. He is convinced that things are going to get worse for many banks (except Wells Fargo, Goldman Sachs and a couple of others) but nobody is talking because the system is so fragile that one slip could bring it all down.

This is no conspiracy theorist folks. This is CNBC / Mad Money / Prime Time / “Boo-Yah” Cramer…and he is pissed.

What separates him from us is that he is now fighting on principal thanks to his hefty net worth. Those of you without $50 million lying around better start paying attention and fighting for your life. This is going to get worse – but you should already know that if you’ve been paying attention to this blog over the past few months.

Regards,
George

As you already know by now, Wall Street was rocked by Citigroup announced a 4th quarter loss of $9.83 billion AND a write down of $18 billion. I won’t go into the remainder of the gory details (slashed dividend, slashed workforce) because you can read them anywhere. Instead, I’m here to tell you the story is only going to get worse.

Why?

First of all, I told you so in previous posts on January 10th (Ron Paul says gold has been rigged) January 3rd (Checkmate), November 27th (Mortgage Reset Chart) and November 15th (Google Shows Washington Is Worried). On top of that, if you didn’t believe us, we also had Jean-Francois Tardif (Sprott) and Jim Rogers (Quantum Fund) tell it to you straight from their mouth. If you haven’t read these posts, do yourself a big favor and read them as soon as you can.

Second, if all of that wasn’t enough, the “boo-yah” bull himself – Jim Cramer – is telling you “this is not the end”. Now, he is specifically speaking about Citigroup but does anybody believe the problems at Citi are contained at Citi? Didn’t think so.

So what did Jim have to say? You can watch it for yourself in this 3:40 interview on TheStreet.com today…but here are some of the best quotes:

“Citi is sitting on $40 Billion in worthless paper”

“Their bet on sub-prime is not over yet”

“This is not the kitchen sink”

“This is not the end”

GOLD, GOLD, GOLD

The US economy is in trouble = interest rate cuts = weaker US dollar = higher gold prices = good for gold stocks. It is that simple. The sub-prime pain is yet to come and it is going to hurt, just look at the mortgage reset chart above from November 27th. In the short-term, stocks are going to take a hit – but once investors realize the US problem is beyond manageable, the flight to gold will be fast and furious. It is already taking place now – but we’re still waiting for the masses to come running in.

Short-term blips aside, gold’s day is yet to come.

Regards,
George

For those of you that haven’t taken a serious look at gold and related stocks (and there are many of you out there), gold just hit a new all-time high of $866 this morning. The previous high was $850 in 1980 – but after adjusting for inflation, gold needs to hit $2,079 to hit a true all-time high – and many believe that is exactly where gold is going.

I’m not sure about $2,079 but I give gold a 40% chance of breaking through $1,000 in 2008. Why? The US Fed. Specifically, real estate prices in the US are getting crushed and that is only going to get worse thanks to the lack of credit liquidity. Furthermore, take a look at the value of US real estate inventory below:

No credit and nobody is buying … anybody want to guess what the Fed will have to do in 2008? Yep, cut slash interest rates. Interest rate cut = Cheaper US Dollar = Higher Gold Prices. It is that simple.

But there is more.

The US is also fighting inflation. Unfortunately, you can’t fight inflation and a credit liquidity crisis at the same time. Fighting one only makes the other problem worse. In this case, cutting interest rates will also lead to higher inflation. Afterall, the purpose of interest rate cuts is to get people to spend. Anybody want to guess what happens to gold when inflation starts climbing?

If you are a chess player, you understand the analogy that the Fed is about to sacrifice its Queen to save the King. Unfortunately, cutting interest rates to help save the real estate market is only going to delay the inevitable pain the US economy must suffer for years of excess and greed. They have picked their poison and thy name is inflation. Checkmate.

Regards,
George

Good morning to you all. If you have any belief/hope/wishful thinking that the worst is over for the US sub-prime mortgage market and its effects on the US financial sector – forget about it. This past July and August were a picnic compared to what is coming next March – October. This Bank of America chart says it all:

Hat tip to Paul Kedrosky for finding it.

Regards,
George